Tesco builds for digital future

24 September 2013

LONDON: Tesco, the UK retailing giant, is positioning itself to capture a new generation of digital native consumers without losing its existing customers, by investing in cutting-edge businesses and recruiting relevant staff.

Writing in the Daily Telegraph, chief executive Philip Clarke said that current developments were "the biggest generational change in consumer behaviour since the 1960s" and that "the digital world is having a deep impact on emerging consumers".

Retailers would have to adapt accordingly or fail, he argued, as he noted that "the school-leaving generation will change our business, from how they are persuaded by a brand, product or idea to how they group together in socially structured economies to collaborate, barter, share and exchange."

Clarke himself was guided by the concept of The Second Curve, a book describing how successful businesses understood their market and chose the right moment to move to a new business model.

"The trick is all in the timing, knowing when you will need to change, preparing early but not switching too soon so you lose your existing customers," he observed.

Part of that strategy had involved buying blinkbox, a digital entertainment business allowing customers to stream music, movies and books.

"What we build today has to serve customers leaving school so we need to make sense to that generation now," he said. "Wait until they're grown up before we build it and we'll be too late, we will have missed our second curve."

As well as recruiting staff who were able to look at the business through the eyes of an emerging consumer, Tesco was also sponsoring a technology entrepreneur incubator, Rainmaking Loft.

"These are some of the architects of future commerce, with creativity and insight into their customers which will be invaluable to us," said Clarke.

It is a route that many large corporations are now taking, as was noted last year in a Warc Trends Snapshot that showed how brands were increasingly looking to harness grassroots digital innovation, particularly in mobile, by linking directly with some of the brightest minds in the business: digital entrepreneurs working in start-ups.